Background and Facts Credible Behavioral Health, Inc., provides
software solutions to behavioral health and human services providers.
Credible offers a tuition loan program to its employees who wish to
pursue undergraduate, graduate, or postgraduate education. Emmanuel
Johnson, a Credible employee, accepted the offer, and the parties
memorialized their agreement in a promissory note. The terms provided
that Johnson would repay the loan after completing his studies, with
the percentage to be repaid depending on how long he remained with the
company. Before Johnson obtained a degree, however, Credible fired him.
When he did not repay the loan, Credible filed a suit in a Maryland
state court against him, seeking repayment. Johnson argued that the
terms of the note required repayment only if he quit his employment,
not if he was fired. The trial court ruled in his favor. Credible appealed.
A state intermediate appellate court affirmed the ruling. Credible
appealed to the state’s highest court, the Maryland Court of Appeals.
In the Words of the Court
GREENE, J. [Judge]
* * * *
* * * Paragraph 1(a) of the promissory note * * * sets forth the
conditions of tuition repayment * * * :
* * * The principal balance of the Loan plus all accrued interest
thereon shall be due and payable * * * if you terminate
employment with the company [less than thirty-six months
after achieving a degree].
* * * *
* * * Credible argues that the terms of the promissory note * * *
reveal that the parties intended the loan to be repaid upon termination
of employment within the relevant time period—regardless of
whether an employee is fired or quits.
[Under] the objective theory of contract * * * approach, the primary
goal of contract interpretation is to ascertain the intent of the parties
in entering the agreement and to interpret the contract in a manner
consistent with that intent. An inquiry into the intent of the parties * * *
is based on what a reasonable person in the position of the parties
would have understood the language to mean and not the subjective
intent of the parties at the time of formation. [Emphasis added.]
* * * *
The final part of Paragraph 1(a) * * * clearly constitutes an obligation
to repay the loan. It reads,
* * * The Loan * * * plus all accrued interest thereon shall be
due and payable ninety (90) calendar days after the termination
of your employment, whether by you or the Company, for any
or for no reason whatsoever * * * .
In other words, * * * the provision * * * requires employees to
repay the loan in situations where he or she is fired. * * * The provision
substantially uncloaks the intent underlying the promissory note.
It makes clear that the parties intended the loan to be repaid * * * in
situations where Credible fires an employee.
Decision and Remedy The Maryland Court of Appeals
reversed the decision of the intermediate appellate court, which had
upheld the ruling of the trial court. “Our review of the promissory
note * * * evinces that the parties intended the loan to be repaid
regardless of whether the employee quits or is fired by Credible.”
Critical Thinking
• Legal Environment As a principle of contract interpretation,
courts consistently strive to interpret contracts in accord with common
sense. Does the application of this principle to the facts in this case support
or undercut the decision of the Maryland Court of Appeals? Explain.
• Economic What consequences might Credible have suffered if
the Maryland Court of Appeals had interpreted the terms of the note
to require repayment only when an employee quit, not when that
employee was fired? Discuss.